Another report concerning the UK housing market has revealed a decline in demand from home buyers. According to the Royal Institution of Chartered Surveyors (RiCS), recent sales and house prices declined in January. Not only is demand down, but supply remains low. The report revealed a net balance of -47% for new buyer inquiries. This level was the lowest since 2009 and the ninth consecutive month with a negative reading. Much of the blame for the lack of attention from hopeful buyers is laid on the higher interest rates facing borrowers and thus making buying a home much more expensive than just one year ago.

RiCS has forecasted further declines in the UK housing market in the months ahead. 

Simon Rubinsohn, the chief economist for RiCS, remarked, “Although some respondents have noted a little more interest in the housing market as the new year got under way, the overall tone of the feedback remains subdued which is not altogether surprising given the jump in mortgage rates since the autumn.

“Prices, meanwhile, are now beginning to reflect the shift in balance between demand and supply. However, it is questionable how much downside to pricing there is likely to be given that recent macro forecasts from the Bank of England and others are now envisaging a less harsh economic environment this year.”

The data concerning the housing market would certainly be a concern to economists as the housing market is an important sector. It would also be a concern to home sellers as the opportunity to sell a property at a top price has liked passed. Other reports have shown declines in asking prices being important in finding a buyer.

However, the state of the housing market is also a concern for homeowners. Declining attention in the housing market that results in dropping house prices creates a decline in property values. Some would say it was inevitable that house prices should decline, even for just a natural correction because house prices soared during the height of the pandemic lockdowns and after.

Buyers were seeking properties that better fit their ideal for their pandemic lifestyle. Most were looking for homes that offered more space both indoors and outdoors which meant that city life was less attractive to buyers than homes that were larger and with gardens and green spaces found in the country. With interest prices connected to the Bank of England’s all-time historic low standard base rate of almost zero, borrowers found buying a home more affordable.

That historic low base rate set by the Bank of England’s Monetary Policy Committee (MPC) sat at 0.1% in December of 2021. One year later in December 2022, after nine consecutive MPC meetings the rate had grown to 3.5%. In February 2023, the MPC raised the rate for the tenth time and it now is at a high not seen in 14 years at 4.0%. 

Homeowners are not only facing higher interest rates that will make their repayments more expensive, but with declining property values it could exponentially cause difficulties for already strained household budgets from inflation, higher energy costs, and rising interest rates. 

Those that are coming to the end of their mortgage term are going to have to choose from remortgage offers or allow their lender to move them to their standard variable rate or SVR. The SVR is a risky choice. In comparison with a remortgage, the SVR is not only likely to have a higher and therefore more expensive interest rate, but it will expose the homeowner to future rate hikes by the MPC. 

A remortgage, due to a likely lower interest rate, could save the homeowner money against choosing a SVR. Choosing a fixed rate remortgage offers a shield from rising rates as the homeowner locks in their chosen interest rate for the length of the new term.

Homeowners that benefitted from buying during the period of historic low interest rates will be facing much higher interest rates and affordability could become an issue. Experts encourage all homeowners to shop for a remortgage sooner rather than later. Doing so allows the homeowner to prepare and set a strategy in place.

One strategy has been to take on a penalty fee and end their mortgage term early. This allows a homeowner to remortgage early and at current rates rather than when they could be higher when their mortgage term is due to end. 

Shopping for a remortgage will allow a homeowner to determine what offers are available.

Those that are newer homeowners and have not been paying on their loan for very long could find themselves declining into negative equity should property values keep declining. Homeowners in negative equity cannot remortgage, so some are choosing to remortgage while they can rather than waiting until later should values decline rapidly as home buyers exit the market.

Also, as property values decline, an important criteria lenders use to offer remortgages is the loan to value ratio. The loan to value or LTV will change as property values decline. Homeowners that have higher property values versus the loan value will be offered the better remortgages. Lower interest rate offers are typical and therefore more savings are achieved.

Homeowners could obtain important information by shopping online for a remortgage. In a matter of minutes, they could have a remortgage quote in hand. Visiting other remortgage lender websites will put quotes in hand to compare. There is also the option to shop the website of a remortgage broker.  

Brokers not only could have exclusive deals not offered directly from lenders to borrowers, but visiting a broker site offers a homeowner many quotes from a variety of lenders to review and compare. 

There is optimism offered lately that the economy might not experience as long of a recession as had previously been expected. Also, it had been forecasted that inflation would grow until later in the year, but it might have already peaked. 

The optimism is a good sign, but it doesn’t mean homeowners should overlook opportunities to save and support their budgets. By shopping for a remortgage, which is quick and easy to do online, the path to doing so could be quickly revealed.